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The $4,000 Question: Where Did Trump Get His ‘Pay Raise’ Number?

Andrey Popov / Adobe

By Michael Rainey

October 12, 2017

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President Trump told an audience in Pennsylvania that the GOP tax plan would give the typical American household a “$4,000 pay raise,” though without providing any detail about the source of that figure.

DJ Nordquist, the chief of staff of the president’s Council of Economic Advisors, told Politico that its analysis “suggests the flow of wages would be $4,000 per year” as companies bring profits held overseas back home.

CEA chief Kevin Hassett has also cited the $4,000 figure, but in the context of eight years, not one. Speaking at the Tax Policy Center last week, Hassett said: “In 2016, U.S. firms kept 71 percent of foreign-earned profits abroad. What would happen if they didn't do that? A simple back-of-the envelope calculation suggests U.S. workers in 2016 would have received a raise of nearly 1 percent. What if these firms didn't do that for the next 8 years? The median U.S. household would get a $4,000 real income raise.”

In either case, the administration is claiming that households will get a boost from the tax plan’s change in how foreign taxes are treated, amounting to either $500 or $4,000 per year. Aside from the question of size, though, there’s a more fundamental question of whether repatriated foreign profits would end up in worker’s pockets in the first place.